On 30th September, 1997 the Legislative Council of the British Virgin Islands enacted the Proceeds of Criminal Conduct Act 1997 (the "Act"). The Act was brought into force on 2nd January 1998. The Act contains provisions broadly similar to those provisions relating to money laundering offences which are found in, or are in the process of being introduced into, the laws of the majority of the sophisticated common law jurisdictions throughout the world. The purpose of the Act is to deter any and all forms of money laundering in the British Virgin Islands.
Section 2(1) of the Act defines criminal conduct as meaning conduct which
(i) Constitutes an offence to which the Act applies, or
(ii) would constitute such an offence if it had occurred in the Territory.
Section 2(5)(d) provides that reference to an offence to which the Act applies are references to all indictable offences other than drug trafficking offences.
Thus the Act is relevant to the proceeds of any action which amounts to (or would if it were committed in the British Virgin Islands amount to) an indictable offence under British Virgin Islands law.
The following matters in particular are considered relevant to the practical application of the Act:
3.1 Fiscal Obligations
(a) British Virgin Islands law contains very limited taxation offences. All such offences are tried summarily and not on indictment. It follows that the Act has no application to taxation offences committed under British Virgin Islands law;
(b) Foreign tax evasion does not amount to an offence under British Virgin Islands law, even if the act comprising the offence is carried out, or is deemed to be carried out, in the British Virgin Islands;
(c) Matters such as theft, robbery, obtaining property by deception, false accounting and handling stolen goods are indictable offences under British Virgin Islands law. In the circumstances, the Act is relevant to the proceeds of such offences, even if the offences are committed outside of the British Virgin Islands;
(d) Conspiracy to commit an offence is also an offence under British Virgin Islands law. Whilst it is not entirely clear, the current view seems to be that the question of whether the conspiracy to commit an offence is tried summarily or on indictment is directly referable to the question of whether the substantive offence to which the conspiracy relates is tried summarily or on indictment. Thus a conspiracy to commit an indictable offence is itself an indictable offence and the Act is relevant to the proceeds of such conspiracy;
(e) Whilst it is not entirely clear, the current view is that conspiracy to defraud a foreign tax authority is not criminal conduct to which the Act applies. However, where the same actions amount to a conspiracy to defraud a third party in addition to defrauding a foreign tax authority, the Act would be relevant to the proceeds of such conspiracy.
3.2 Forced Heirship
There are no provisions or offences under British Virgin Islands law similar to the forced heirship rules found in some jurisdictions. In the circumstances the Act has no relevance to steps taken to defeat such forced heirship rules, even if such steps amount to an offence in another jurisdiction.
3.3 Exchange Control
The US dollar is the official and only currency of the British Virgin Islands and there is no exchange or currency control in the Territory. Accordingly, the Act has no relevance to steps taken to avoid foreign exchange controls, even if such steps amount to an offence in another jurisdiction.
4. Designated Countries and Territories Order and Code of Practice
The Act made provision, inter alia, for the Governor in Council:
(a) by Order to designate countries or territories outside the British Virgin Islands as countries and territories to which the Act shall apply; and
(b) to issue a Code of Practice giving practical guidance with respect to the requirements of the Act.
4.1 Designated Countries and Territories Order
On 14 October 1999 an Order was Gazetted as The Proceeds of Criminal Conduct (Designated Countries and Territories) Order 1999.
This Order amends several of the provisions of the Act and restates it in its entirety, and also designates the following countries and territories as designated countries and territories:
(k) Sweden; and
(l) United Kingdom.
With respect to these designated countries and territories, the Act is stated to apply in respect of orders made by the courts of such designated countries and territories for the purpose of recovering payments or other rewards received in connection with criminal conduct ("external confiscation orders") and proceedings which have been or are to be instituted therein and which may result in an external confiscation order being made there.
4.2 Code of Practice
Also on 14 October 1999 a Code of Practice was Gazetted as The Anti-Money Laundering Code of Practice 1999.
The Code defines "regulated persons" as those carrying on:
(a) a banking business or trust business within the meaning of the Banks and Trust Companies Act, 1990;
(b) insurance business within the meaning of the Insurance Act 1994;
(c) the business of company management within the meaning of the Company Management Act, 1990;
(d) business as a mutual fund or providing services as manager or administrator of a mutual fund within the meaning of the Mutual Funds Act, 1996;
(e) business as a general partner or limited partner within the meaning of the Partnership Act, 1996;
(f) business as a company under the Companies Act or the International Business Companies Act;
(g) any activity involving the remittance of Telegraph Money Order under the Post Office (Telegraph Money Order) Rules, 1934;
(h) any activity involving money transmission services or cheque encashment facilities;
(i) any activity in which money belonging to a client is held or managed by
(i) an Attorney-at-Law;
(ii) an accountant or a person who, in the course of business, provides accountancy services;
(j) the business of acting as company secretary of bodies corporate.
The Code states that regulated persons are not to form business relationships or carry out one-off transactions with or for another person unless they:
(a) maintain the following procedures, details of which are set out in the Code
(i) identification procedures;
(ii) record keeping procedures;
(iii) internal reporting procedures; and
(iv) internal controls and communication procedures which are appropriate for the purposes of forestalling and preventing money laundering; and
(b) take the appropriate measures from time to time for the purpose of making employees aware of
(i) the procedures maintained under subparagraph (a) above; and
(ii) the provisions of the Act, and Regulations made thereunder, the Code and any directives issued thereunder; and
(c) provide training for employees to assist them
(i) in the recognition and handling of transactions carried out by, or on behalf of, any person who is, or appears to be, engaged in money laundering;
(ii) in dealing with customers where such transactions have been reported to the Reporting Authority in accordance with the provisions of the Act.
The Code also requires that relevant persons must:
(a) submit the identification, record keeping, internal reporting and internal control and communication procedures required above to the Reporting Authority, which may keep copies of the same;
(b) appoint or designate a member of staff as a Compliance Officer who shall be a senior officer with relevant qualifications and experience and whose appointment shall be approved by the Director of Financial Services.
Under the Code, the Director of Financial Services or a person designated by him in writing, is authorised to conduct an inspection of any relevant person to determine compliance by that person with the requirements of the Code and any other law or directive relating to money laundering.
Failure to comply with the requirements of the Code or any directive relating to money laundering issued thereunder commits an offence and is liable on summary conviction to a fine not exceeding US$5,000 and on conviction on indictment (for a first offence) to a fine not exceeding US$10,000 or (for a second or subsequent offence) to a fine not exceeding US$15,000.
The Code makes further reference to Guidance Notes on the Prevention of Money Laundering to be issued by the British Virgin Islands Joint Anti-money Laundering Co-ordinating Committee. In particular, the Code states that in the preparation of the relevant procedures required to be maintained in accordance with Code, relevant persons may adopt or have regard to the Guidance Notes. As at 1 December 1999 the Guidance Notes had not yet been Gazetted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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